Question 1

How many Nash equilibria are there in this payoff matrix?

Accepted Answer

A)   0.
B)   1.
C)   2.
D)   3.
E)   4. C

Question 2

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM) and Quaker Oats (Q) if they engage in a price war.If GM cuts prices and Quaker Oats follows this behavior:

Accepted Answer

A)   GM loses $10 million.
B)   Quaker Oats loses $10 million.
C)   GM loses $2 million.
D)   Quaker Oats loses $2 million.
E)   both firms gain $3 million.

Question 3

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM) and Quaker Oats (Q) if they engage in a price war. 
If GM cuts prices,the greatest potential gain is:

Accepted Answer

A)   $5 million per year.
B)   $10 million per year.
C)   $2 million per year.
D)   $3 million per year.
E)   none of the above.

Question 4

Refer to the accompanying payoff matrix.Which of the following is a Nash equilibrium?

Accepted Answer

A)   Company A chooses Strategy 1 and Company B chooses Strategy 1.
B)   Company A chooses Strategy 1 and Company B chooses Strategy 2.
C)   Company A chooses Strategy 2 and Company B chooses Strategy 2.
D)   Company A chooses Strategy 2 and Company B chooses Strategy 1.
E)   None of the above.

Question 5

Suppose that firm A finds itself facing the following payoff matrix in its rivalry with firm B: 
A threatens to play strategy W.This threat is:

Accepted Answer

A)   credible because the Nash equilibrium occurs where A plays W and B plays Z.
B)   credible because the joint optimal solution occurs where A plays W and B plays Z.
C)   not credible because A's dominant strategy is to play X.
D)   credible because A's dominant strategy is to play W.
E)   not credible because B will never play strategy Z.

Question 6

Refer to the accompanying matrix.Which of the following is a Nash equilibrium?

Accepted Answer

A)   Company A chooses Strategy 1 and Company B chooses Strategy 1.
B)   Company A chooses Strategy 1 and Company B chooses Strategy 2.
C)   Company A chooses Strategy 2 and Company B chooses Strategy 2.
D)   Company A chooses Strategy 2 and Company B chooses Strategy 1.
E)   None of the above.

Question 7

A player in a game theoretic model is:

Accepted Answer

A)   anyone working for a firm that is operating strategically.
B)   a decision-making entity at a firm involved in a strategic game.
C)   a firm that is operating as a perfect competitor.
D)   a monopolist who produces a unique product with no close substitutes.
E)   a stockholder at a firm involved in a strategic game.

Question 8

The difference between game trees and decision trees is:

Accepted Answer

A)   that game trees are not useful in strategic situations.
B)   that decision trees describe actions that depend on the behavior of rivals.
C)   that game trees have interactive payoffs.
D)   that decision trees are a function of many individuals and the state of nature.
E)   none of the above. C

Question 9

A dominant strategy is one that:

Accepted Answer

A)   beats all others, regardless of the opponent's choice.
B)   beats all others, given the opponent's choice.
C)   is beaten by all others, regardless of the opponent's choice.
D)   is beaten by all others, given the opponent's choice.
E)   beats at least one other, given the opponent's choice.

Question 10

A Nash equilibrium occurs when:

Accepted Answer

A)   each player has a dominant strategy.
B)   each player receives the same final payoff.
C)   each player believes it is doing the best it can given the behavior of rivals.
D)   there is no dominant strategy for any player.
E)   payoffs are independent of the actions taken by rivals. C

Question 11

Given the following payoff matrix,who has a dominant strategy?

Accepted Answer

A)   It depends on what the other player does.
B)   Both players have it.
C)   Neither player has it.
D)   A does; B doesn't.
E)   B does; A doesn't.

Question 12

Radio City promises if you can find a lower advertised price for anything you bought at Radio City,anywhere in town within 30 days,it will return the difference plus 20%.A sophisticated game theoretic analysis suggests Radio City may be:

Accepted Answer

A)   losing money in the long run.
B)   colluding with other stores.
C)   using a commitment to threaten competitors.
D)   preempting competitors.
E)   using price leadership.

Question 13

Getting to a Nash equilibrium requires:

Accepted Answer

A)   each knowing the opponent's payoffs and cooperation.
B)   knowing the opponent's payoffs but not cooperation.
C)   cooperation but not knowing the opponent's payoffs.
D)   neither cooperation nor knowing the opponent's payoffs.
E)   either cooperation or knowing the opponent's payoffs, depending on the game.

Question 14

A feasible strategy set is:

Accepted Answer

A)   all actions with a nonzero probability of occurring.
B)   only actions that have a 50% or greater probability of occurring.
C)   actions that result in positive profits for the firm.
D)   actions that a decision maker is willing to take.
E)   the one outcome that the decision maker chooses.

Question 15

Which pair of strategies would cooperative cartel members A and B choose given this payoff matrix?

Accepted Answer

A)   W, Y.
B)   W, Z.
C)   X, Y.
D)   X, Z.
E)   Either X, Y or W, Z.

Question 16

How many Nash equilibria are there in this payoff matrix?

Accepted Answer

A)   0.
B)   1.
C)   2.
D)   3.
E)   4.

Question 17

By definition,a Nash equilibrium in a duopoly is the situation in which each player:

Accepted Answer

A)   plays a dominant strategy.
B)   plays the best strategy given the other's strategies.
C)   gets the highest possible payoff.
D)   gets the highest payoff possible without lowering the opponent's payoff.
E)   is happy with the outcome.

Question 18

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:

Accepted Answer

A)   P > I's average total cost.
B)   P > I's average variable cost.
C)   P is low enough to discourage E.
D)   I could conceivably charge P without E's threat.
E)   I's profit with P and no entry are better than expected profits with entry.

Question 19

If player 1 has a dominant strategy,then player 2:

Accepted Answer

A)   must also have a dominant strategy.
B)   may or may not have a dominant strategy, but will always lead to a Nash equilibrium.
C)   may or may not have a dominant strategy.
D)   will not be able to reach an optimal solution to the game.
E)   will block this dominant strategy and force player 1 to another strategy.

Question 20

If a firm has a dominant strategy:

Accepted Answer

A)   its optimal strategy depends on the play of rivals.
B)   its optimal strategy is always the same, even if payoffs change.
C)   it is determined by the behavior of only one key rival.
D)   it receives the same profits regardless of the strategy of rivals.
E)   its optimal strategy is independent of the play of rivals.

Exam 12: Game Theory

How many Nash equilibria are there in this payoff matrix?

Correct AnswerverifiedC

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM) and Quaker Oats (Q) if they engage in a price war.If GM cuts prices and Quaker Oats follows this behavior:

Correct AnswerverifiedShow Answer

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM) and Quaker Oats (Q) if they engage in a price war. If GM cuts prices,the greatest potential gain is:

Correct AnswerverifiedShow Answer

Refer to the accompanying payoff matrix.Which of the following is a Nash equilibrium?

Correct AnswerverifiedShow Answer

Suppose that firm A finds itself facing the following payoff matrix in its rivalry with firm B: A threatens to play strategy W.This threat is:

Correct AnswerverifiedShow Answer

Refer to the accompanying matrix.Which of the following is a Nash equilibrium?

Correct AnswerverifiedShow Answer

A player in a game theoretic model is:

Correct AnswerverifiedShow Answer

The difference between game trees and decision trees is:

Correct AnswerverifiedC

A dominant strategy is one that:

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A Nash equilibrium occurs when:

Correct AnswerverifiedC

Given the following payoff matrix,who has a dominant strategy?

Correct AnswerverifiedShow Answer

Radio City promises if you can find a lower advertised price for anything you bought at Radio City,anywhere in town within 30 days,it will return the difference plus 20%.A sophisticated game theoretic analysis suggests Radio City may be:

Correct AnswerverifiedShow Answer

Getting to a Nash equilibrium requires:

Correct AnswerverifiedShow Answer

A feasible strategy set is:

Correct AnswerverifiedShow Answer

Which pair of strategies would cooperative cartel members A and B choose given this payoff matrix?

Correct AnswerverifiedShow Answer

How many Nash equilibria are there in this payoff matrix?

Correct AnswerverifiedShow Answer

By definition,a Nash equilibrium in a duopoly is the situation in which each player:

Correct AnswerverifiedShow Answer

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:

Correct AnswerverifiedShow Answer

If player 1 has a dominant strategy,then player 2:

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If a firm has a dominant strategy:

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